Godrej Agrovet

Incorporated in 1991, Godrej Agrovet Limited (GAVL) is a diversified agribusiness Group with operations across 5 business
verticals comprising of –
 Animal feed,
 Oil palm,
 Crop protection,
 Dairy, and
 Poultry and processed foods.

The Company focuses on improving the productivity of farmers by innovating products and services that sustainably
increase crop and livestock yields. Its crop Protection business has a wide range of products that cater to the entire crop
lifecycle. The product portfolio for this segment includes:

Product Segment Product Description Crop

Plant Growth Regulators Triacontanol based Cotton, Rice, Tomato, Chilli, Groundnut
Bio – stimulants Homobrassinolide and amino acids based Chilli, Grapes, Onion, Tea, Tomato,
Potato, Cabbage, fruity vegetables
Herbicides Halsosulfuron, Glysophate, chloroacetamide, Sugarcane, Maize, Bottle guard, Tea,
pyrimidinyl carboxy, phenoxy carboxylic Cotton, Transplanted rice, Paddy,
Groundnut
Insecticides Thiamethoxam, Emamectin, isoxazoline Tea, Cotton, Chilli, Paddy, Maize,
Sugarcane, Cabbage, Chickpea, Brinjal,
Okra, Redgram, Tomato
Fungicides Azoxystrobin, Cymoxanil, Carbendazim, Chilli, Tomato, Paddy, Maize, Wheat,
Tebuconazole, Tebuconazole Grape, Potato, Cucumber, Groundnut,
Rice, Papaya, Apple, Mango, Soyabean
Fertlizers and Organic Amorphous silicone, blend of high-quality neem and All Crops and Fruit Orchards
Manures well-decomposed organic manure

 It is the world's largest producers and marketers of Homobrassinolides and the leader in selective post-
emergence cotton herbicides in India.

 ‘GRACIA’ is a novel isoxazoline insecticide launched in collaboration with Nissan Chemical Corporation. It is used
in crops – brinjal, cabbage, chili, okra, red gram and tomato.

 ‘Hitweed’ is India's first highly selective herbicide for Cotton. It contains 'Pyrithiobac Sodium' as an active
ingredient. Hitweed is highly effective on several broad leaf weeds.

Financials:

₹ Crores
Particulars FY23 FY22
Total Income 9,481 8,386
EBITDA 564 723
Profit Before Tax 280 487
Profit After Tax 239 409
Segment wise
₹ Crores
Particulars FY23 % FY22 %
Animal feed 4,951 53% 4,346 31%
Vegetable Oil 1,294 14% 8,386 60%
Crop Protection 1,189 13% 723 5%
Dairy 1,500 16% 487 4%
Poultry and processed food 1,003 11% 409 3%
Other business 53 1% 30 0%
Inter segment elimination -637 -7% -503 -4%

In FY 2022-23, growth in domestic agrochemicals sector was largely driven by higher prices while volumes remain muted. It
was a relatively mixed year for the company’s crop protection business. It registered a prompt recovery in topline while also
achieving highest ever sales for the business. The sales growth was led by in-house portfolio comprising of HITWEED range
of herbicides coupled with in-licensed insecticides, GRACIA, which was launched in February’22. However, margin profile
was impacted due to lower volumes in the Plant Growth Regulators (PGR) category, product rationalization initiatives and
limited transmission of rising input costs.

Company’s subsidiary, Astec LifeSciences Ltd, faced volume headwinds and price corrections in both exports as well as
domestic markets due to high inventories, de-stocking strategies and demand slowdown amid adverse climatic conditions
in important regions. Nonetheless, Astec’s performance in contract manufacturing (CMO) segment was in line with the
expectations with 1.9x growth in revenues as compared to the previous year.

Strategy

The company launched its in-licensed insecticide, GARCIA in February 2022 which achieved a very important volume
milestone in its first year of the launch itself. Going forward, along with the existing
product portfolio, the company will also focus on new product development through in-house R&D initiatives and in-
licensing collaborations with innovators / large global players.

In April’23, Astec inaugurated a new state-of-the-art Research & Development centre, named “Adi Godrej Centre for
Chemical Research and Development” in Rabale, Maharashtra. In the next Financial Year, Astec LifeSciences will continue to
focus on scaling up R&D projects, diversification into other molecules as well as chemistries and expanding its customer
base for contract manufacturing business.

How it stands against its competitors:

₹ Crores
Particulars PI Industries Deccan Chemicals Godrej Agrovet
Revenue from operations 6,492 8,639 9,481
EBITDA 1,708 2,542 564
EBITDA margin (%) 26% 29% 6%
Profit Before Tax 1,444 1,581 280
Profit After Tax 1,230 1,168 239
PAT margin (%) 19% 14% 3%
Manufacturing facilities 4 3 4
Distributors 10,000+ NA 6,600
Formulations (Insecticides, Crop protection, Animal feed, Crop
Portfolio Fungicide, Herbicides, Pharmaceutical and protection, Oil palm,
Specialty products), R&D animal health and Dairy, poultry and
and distribution services specialty chemicals processed products
Credit rating

During the Financial Year 2022-23, the Company had dual rating for its Commercial Paper Program of ₹ 1,000 Crore as
follows:
1. Credit Rating by ICRA Limited: “ICRA A1+” (pronounced as ‘ICRAAone plus’ rating); and
2. Credit Rating by CRISIL: “CRISIL A1+” (pronounced as ‘CRISILAone plus’ rating).

Moreover, the Company’s long term rating for its ₹ 68.25 Crore Bank limits / facilities is “ICRA AA’’
and short-term rating of “ICRA A1+” for its ₹ 595 Crore Bank limits / facilities.

Manufacturing facility:

Manufacturing facilities for crop protection segment is located in - Samba (Jammu) and Lote Parshuram (Ratnagiri,
Maharashtra)

For its crop protection segment the company has:

 4 Manufacturing facilities, and
 6,600 Distributors network

Industry data points:

 India is the world's fourth-largest producer of agrochemicals - after the US, Japan, and China. T
 Indian agrochemical industry was valued at $ 9.3 Bn in the year FY23 with potential to become $17.4 Bn industry
by FY28.
 Exports attributed to ~60% of the Indian agrochemicals market in FY23 and is expected to grow at a CAGR of
14.5% from FY23 to FY28
 Among various pesticide categories, insecticides dominate the market unlike herbicides globally, accounting for
>50% of the Indian market share

Emerging landscape of Indian agrochemical market:

 Crop protection chemicals such as bio-pesticides, nematicides, rodenticides, plant growth regulators, and more is
expected to gain larger market share by 2025
 Formulation players contribute ~60% to agrochemical market by revenue. However, there has been a recent shift
towards producing and consuming technical-grade agrochemicals due to factors such as the growing demand
for generic agrochemicals, cost-effectiveness, reducing China dependence, and the ability to customize
formulations based on specific crop requirements
 There is a constant need to launch innovative products among industry players to set them apart from their
competitors
 Shift in focus to sustainable methods of farming and crop protection such as agro-ecology, bio-pesticides,
organic manures etc, agritech, precision farming etc.

Growth drivers in agrochemical sector:

 Need to increase crop yield

 Leveraging off –patent molecules - molecules worth $ 8 bn are going off-patent by FY 28
 Large opportunity in CRAMS (Contract Research and Manufacturing Services) space. Industry was valued at $ 12.2
Bn in 2020, which was about 6% of the global market. It is expected to grow at 12% to reach $ 21.5 billion by FY25
 Policy reforms – simplification in registration process for bio-pesticides, incentive schemes
 Opportunity in exports - India has emerged 2nd largest exporter of agrochemicals
Potential area of interest – Drone in Precision Farming:

 Concept of ‘Drone-as-a-Service’ is catching pace due to small land holding and limited purchasing power of
Indian farmers and increasing push from government
 Agri drone market to grow to ~Rs. 26,800 crores by 2030
 The drone training and education service market was valued at $12 million in 2022 and is forecast by experts to
reach $349 million in 2030
 Application of drones in farming:
o Crop monitoring
o Crop spraying
o Disaster management
o Water conservation

Questions for GAVL: Strategic partnerships, build brands and strong distribution network.
Inlicensing via tieups with leading agrochemical companies – focused on marketing and distribution
- Strong product portfolio and pipeline : Dhanuka

High barrier custom synthesis and mfe services catering to global innovators to commercialize their novel
molecules

 Target company profile that would be of interest for GAVL in terms of:
o Revenue of target company
o EBITDA Margin %
o Technical preparation business vs Formulation focused business
o Any product or formulation focused
o Necessity of Distribution partner integration

 Thoughts on the regulatory framework around the industry and susceptibility of agro-chemicals business to the
government regulations. For instance, European Union’s recent ban on S-Metolachlor

 Other area of interest for the company such as agri-tech business, Agri Drone business etc,
Listed peer multiples:

 Indian players are trading at a median EV/ TTM Revenue multiple of 2.4x and EV/ EBITDA multiple of 17.6x

Private Transactions:

 The private transactions have happened at a median EV/ EBITDA multiple of 16.1x

Deal Value Stake Net EV

Date Company Investor FY Revenue (₹ Mn) EBITDA EBITDA % EV/ Revenue EV/EBITDA
(₹ Mn) % Debt (₹ Mn)
Sep-23 Barrix Agro Sciences Pvt. Ltd. Sumitomo Chemical India Ltd. 850 85% 31 1,031 FY23 387 56 14% 2.7x 18.4x
Abu Dhabi Investment Authority,
Feb-23 Upl Sustainable Agri Solutions Limited 15,800 9% -1,080 1,72,737 FY23 37,000 7,200 19% 4.7x 24.0x
TPG Capital, Brookfield
International Finance Corporation,
Oct-22 Crystal Crop Protection Ltd US International Development 3,000 9% 3,185 37,667 FY22 22,800 3,700 16% 1.7x 10.2x
Finance Corporation
Chrys Capital, Neeraj Kumar jindal,
Sep-22 Safex Chemicals (India) Ltd 2,600 17% 387 16,069 FY22 7,900 1,000 13% 2.0x 16.1x
Piyush Jindal
Jan-20 Parijat Industries (India) Pvt Ltd Rabo Equity Advisors 200 8% 1,203 3,586 FY20 6,400 297 5% 0.6x 12.1x
Krishi Rasayan Exports Pvt Ltd, Agro
Mar-19 Nacl Industries Ltd 1,100 19% 1,855 7,747 FY19 8,900 395 4% 0.9x 19.6x
Life Science Corp, K Lakshmi Raju
Oct-16 Excel Crop Care Limited Sumitomo Chemical Company Ltd 6,200 45% -215 13,563 FY17 9,700 1,000 10% 1.4x 13.6x
Median 1.7x 16.1x